2008 Annual Report Embraer_LWYF_8,5x11in.pdf 8/7/08 1:32:10 PM C M Y CM MY CY CMY K Report from the Chairman Dear RAA Members and Friends, 2008 will be remembered as one of the most challenging periods in modern airline history. Crude oil has more than doubled in the past year, soaring past an all-time record price over $147 in July. When you consider that the price of oil has increased nearly 700 percent in less than seven years culminating with this year’s record smashing levels it is understandable why so many airlines around the world face uncertain times. Unfortunately, the crisis we are facing involves a battle on two fronts. Even as we are pressured on the cost side, the revenue environment in the airline industry continues to be a challenge. When you compare ticket prices from 2000 and the first half of 2008, domestic air fares have actually decreased. Yet fuel expenses burn through 40 percent of passenger revenues today, up from 15 percent in 2000. Twenty percent of the total cost of a $300 domestic one-stop ticket now goes toward government taxes and fees, up from 13 percent in 1992. Squeezed between expanding taxes and fees (now an $18 billion annual burden) and fuel prices, the revenue slice of the ticket-price pie is looking more and more like a sliver. The overriding issue for our economy, of course, is our country’s lack of a coherent energy policy and our chronic 2007-2008 inability to end our dependence on foreign oil. Rather than succumbing to the polarizing and mutually negating Board of Directors arguments of opposing political parties, perhaps it is time to find a constructive middle ground that would embrace a policy that both emphasizes energy efficiency and allows responsible exploration and utilization of domestic energy Chairman resources – including oil, clean coal and nuclear sources. Such a pragmatic approach, which would also include more Bryan Bedford investment in alternative energy and hybrid technology, might not make us energy independent overnight, but it Republic Airways Holdings could help us take major steps toward that goal within the next 10 years. Over the past decade America has come to rely on regional airlines because we provide what customers value: Vice Chairman safe, convenient and affordable service. And regional airlines deliver this consistently without a “one size fits all” Rick Leach mentality. Today, nearly one in every four US domestic passengers flies on a regional airline, and regional flights Trans States Holdings represent fully one half of the total scheduled flights across the country. In 442 American communities — 70 percent of the commercial service airports — regional airlines provide the only scheduled service. Regional airlines employ Treasurer some 60,000 skilled professionals nationwide, and since 9-11 we’ve grown our workforce by some 20 percent. In Russ “Chip” Childs short, regional airlines have become fundamental to our nation’s commercial air transportation system. SkyWest Airlines The same entrepreneurial spirit and sound business strategies that helped fuel regional airline growth over the past Secretary decade will continue to serve our member airlines as we adjust the economics of operating in this new operating Dan Wolf environment. While some communities may experience a loss of service due to the harsh economic realities of the Cape Air current economy, the value and important service we offer our network airline partners will continue to secure our relevance well into the future. Directors Working through RAA, our collaborative efforts have strengthened the voice of regional aviation in the nation’s Joseph Randell capital. The association’s efforts pay dividends on a daily basis: coordinating with FAA to keep the skies safe and Jazz Air efficient; educating journalists about the benefits of regional aviation and setting the record straight on the failures Jim Rankin of the current ATC infrastructure and the “off-target” policy decisions such as peak-hour pricing and slot auctions; Air Wisconsin and convincing TSA that increased security doesn’t mean making it even harder for our passengers to get where Peter Bowler they’re going, or for our employees to do their jobs. American Eagle Airlines Tim Komberec Next May we will reconvene for our annual convention in Salt Lake City. In the mean time stay involved; our Empire Airlines association is made stronger by the efforts of all of our members. Thanks again to each of you for your continued Doug Voss support of our Regional Airline Association. Great Lakes Aviation Dave Hackett God bless, Gulfstream International Airlines Steve Farrow Piedmont Airlines Bryan Bedford RAA 2008 Annual Report 1 We offer the longest running Component Availability program in history of aviation. What’s new. Fokker Services is a front runner in innovative aftermarket support solutions, like the Performance Based ABACUS Component Availability Program, which has been running for over 14 years. Our supply chain solutions include: s Supply Chain Management (including specifi c challenges for out of production A/C) s Spare Parts Supply s Component MRO Services s Component Availability Services Together with our US based subsidiaries Fokker Aerotron and Fokker Airinc, Fokker Services continuously explores new initiatives to expand the span of our support services and improve them. The focus for these ongoing developments is improving affordability, reliability and availability of our customer’s fl eets. Next to the support of the Fokker fl eet, Fokker Services today serves operators with Bombardier Dash 8 aircraft with our ABACUS program, and holds in-house Component MRO capabilities on Airbus and Boeing aircraft which already cover over 10,000 components. Whether you need a comprehensive set of total aircraft conversion and support services, or a tailored package of MRO services, Fokker Services has all the skills and capabilities in house to exceed your requirements. FOKKER SERVICES BUILT ON SOLID GROUND Adv_FS8313_Regional-International_8,5"x11".indd 1 01-07-2008 13:37:38 Foreword from RAA President Roger Cohen “Tough times don’t last, but tough people do” Dear RAA Members and Friends, That cliché has been attributed to, among others, author Norman Vincent Peale, actor Gregory Peck, televangelist Robert Schuller – and probably half the high school football coaches in the country. But that quote rings so true today. Whoever thought we’d look back nostagically on the Summer of 2007 – when it seemed the biggest challenges we faced were the shortage of pilots and the crazy perception that regional aircraft were somehow the cause of ATC delays. Oh, what I wouldn’t give to have those “challenges” again since in less than one year’s time, skyrocketing fuel costs have triggered a set of opposite, more painful, problems: grounded airplanes, and even some whole airlines. Thousands of skilled airline professionals, many the same people we worked so hard to recruit and train last summer, suddenly out of work. Hundreds of communities with fewer flight choices, including dozens left with no scheduled service at all. But history also shows that in the toughest times, there’s an even greater need for industry unity, for sharing scarce resources and fighting common problems collaboratively. That’s why RAA is proud of what we’ve been able to achieve for our members during this year, perhaps as difficult a period for our airlines since RAA’s inception in 1975. • While Congress agreed on precious little, members in both parties and both chambers endorsed nearly unanimously the RAA principles of protecting affordable, convenient service to the 70 percent of American communities relying on regional service exclusively for scheduled flights. The latest FAA reauthorization measures reflected RAA’s strategic goals: no new “user fees” on regionals, but corporate aviation must pay more for its growing use of the nation’s airports and airways. • RAA greatly expanded and improved its core member services, adding a full-time professional to knock on doors — and sometimes knock heads — at TSA. RAA’s team also stepped up to the growing complexity of environmental regulations, while continuing to represent our members on the laundry list of issues facing members in Congress, at DOT and FAA. • We made good on our promise to bring RAA’s communications into the 21st Century, so that our key constituencies — member airlines, Associate Members, government officials and the nation’s news media — have easy access to the most current, accurate information through this Annual Report, Regional Horizons magazine, and our overhauled, updated website. If www.raa.org isn’t your homepage now, please make sure it tops your “favorites” list. • Perhaps most importantly, through the unwavering support of our loyal sponsors and this year’s hometown Republic Airlines, we were able to deliver our biggest RAA Convention, ever. Even while fuel costs continued to rise, more airlines and more industry partners gathered in Indianapolis to share their common bond, renew personal relationships and nurture the kind of friendships needed to survive and hopefully prosper in today’s new world. The “tough times” aren’t over – fuel costs remain unsustainable, the economy still struggles and as it heads out the door, ideologues in the Bush Administration continued to push congestion pricing and slot auction schemes aimed right at the heart of regional aviation. But the “tough people” who’ve built RAA and our member airlines over these past 30-plus years have faced tough times before, and we’re still standing strong and fighting harder than ever before. Maybe someday we’ll be able to look back nostalgically at even this summer, recalling how well we overcame these challenges. With your continued support, I’m confident these tough times will have, hopefully, a very short shelf life. Thanks again.